Zille accuses Telkom of insider trading

Leader of the Democratic Alliance, Helen Zille, says that the sharp rise in Telkom’s share price may have been due to inside information of its awarding of a major government contract to deliver broadband.

In a speech tabled by the Western Cape Premier, for the State Of The Province Address, Zille said that “every sensible South African was astounded to hear that the national government has awarded Telkom the monopoly for broadband roll-out nationally”.

Government has a 39.76% stake in Telkom, while it has an additional 13.48% stake in the telco through the Government Employees Pension Fund (PIC).

Zille said that it is telling that Telkom tendered for the Western Cape broadband contract, and was beaten in open competition by several other providers.  “By shielding Telkom from open competition, President Zuma has removed all incentives to produce an effective and affordable service”.

The DA head said that if Telkom’s management of the ADSL lines is anything to go by – with over a million lines still unutilised – “we are in for another Eskom and Sanral experience here.  This will be economically disastrous for South Africa, but very lucrative for the ANC and a few connected cadres.”

Zille said that if one were to look for an explanation for the inexplicable, one need only follow the money.

Zille pointed to Telkom’s share price over the past few months, climbing from R11.93 in May, 2013 to R76.50 in February, “which strongly suggests speculation by insiders based on the privileged information that Telkom would be designated as the lead Broadband agency”.

Shares in Telkom were up 4% or R3.09 to R80.10 in intraday trade on the JSE on Friday (20 February,  and have gained 144% in the year to date.

“If this is true, it is both criminal and corrupt,” Zille said.

“As the revered struggle hero Frank Chikane once said:  every project in government is designed to make someone in the ANC rich.  We are determined not to let this corruption derail our broadband roll-out,” the premier said.

Jacqui O’Sullivan, Telkom’s managing executive for group communication, said that Telkom’s share price has risen over the past two years owing to several factors, including:

  • “An appreciation of the positive actions taken by management and board in the past two years, such as cleaning up the balance sheet, settling Competition Commission cases  and articulating  its stance on regulatory issues;
  • Addressing its heavy cost base;
  • Anticipated positive outcomes by the market of revenue enhancing transactions such as the proposed MTN agreement and BCX transaction.

“Telkom has been proactive in defining its role as a listed national incumbent in the roll-out of national broadband. Government as a key corporate customer for Telkom will play an integral role in this.”

Zille was unable to deliver her address, due to constant disruptions, however, the DA published her note on its website.

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Zille accuses Telkom of insider trading